MONTREAL – Valeant Pharmaceuticals increased its hostile offer to buy Botox-maker Allergan on Wednesday and threatened to bypass the board by taking it directly to shareholders.

However analysts suggested, the Quebec-based company may have to raise its offer again if it wants to be successful.

“Our first impression is that the Valeant offer is rather disappointing. It does not really alter the fundamental value of the offer,” said Ronny Gal of Bernstein Research.

Valeant upped the cash component of its offer by US$10 to US$58.30, while the stock portion remained unchanged at 0.83 of a Valeant share giving the bid a total implied value of about US$163.67 per share or almost US$50 billion total.

It also offered pay up to about US$25 per share contingent on the success of Allergan’s eye drug Darpin, a treatment for a cause of blindness in the elderly, that is under development.

“We hoped for something more imaginative, like substantially altering the share of cash and stock Valeant will use or a more substantial increase in the value offer,” Gal said.

Valeant CEO Michael Pearson said the new offer responds to concerns that the previous bid was “a little low” and didn’t reward Allergan shareholders for potential gains from Darpin.

“The real message we continually got back is Allergan shareholders want this deal to occur but they wanted a higher price,” he told an investor presentation in New York.

In addition to the contingent payments, Valeant committed to invest US$400 million in Darpin and keep the employees responsible for its development.

Pearson said Valeant is awaiting U.S. regulatory approval to hold a ‘referendum’ of Allergan shareholder in late June or early July and then follow it up if necessary with a formal vote if the California-based company’s board and management continue to refuse any face-to-face negotiations.

“We are open to any and all approaches to try to get this deal consummated,” he said during the nearly four-hour event.

Pearson added Valeant is not willing to “continually increase” its offer until it meets directly with Allergan, and will not increase the share component because its shareholders don’t want to further dilute their ownership.

Valeant’s (NYSE:VRX, TSX:VRX) shares closed down US$3 at US$126.95 on Wednesday trading in New York and down C$3.02 at C$138.11 in Toronto.

Allergan’s shares fell US$8.90 to US$156.12 on the New York Stock Exchange.

The offer by Valeant has the backing of Bill Ackman’s Pershing Square Capital Management LP — Allergan’s biggest shareholder at 9.7 per cent — which has agreed to take only stock in the transaction.

Allergan (NYSE:AGN) said Wednesday it will review the revised offer and “pursue the course of action that the board believes is in the best interests of the company and all of its stockholders.”

The company has been harshly critical of Valeant and raised questions about its ability to cut US$2.7 billion of expenses without disrupting the business if it is successful in acquiring the company.

Some analysts have said Valeant will have to substantially boost its offer to as much as US$200 per share including a larger cash portion because Allergan is “well-positioned” to grow as an independent company.

Analyst Vamil Divan of Credit Suisse said the offer is better, but may not be compelling enough given Allergan’s strong outlook.

“Given that the majority of the offer would still be in Valeant stock, how one values Valeant stock goes a long way to determining the true value of the deal,” he wrote.

Neil Maruoka of Canaccord Genuity said Valeant could further increase its bid because the updated offer was a smaller increase than anticipated.

“While this higher offer might not yet be enough to fully sway Allergan shareholders, we believe that it could lead Allergan’s board to engage with Valeant,” he wrote in a report.

Earlier Wednesday, Valeant said it has agreed to sell the rights to five dermatological products to Nestle S.A. for US$1.4 billion.

“By selling it ahead of time we have eliminated one more one roadblock in terms of our integration with Allergan and we were able to get a price that was more than five-time sales, so we think it also created real shareholder value,” Pearson told the New York audience.

Valeant said Nestle expects to complete its acquisition of Galderma S.A. in July. The transaction is subject to customary closing conditions and Valeant said it’s not contingent on a successful transaction with Allergan.

The five anti-aging skin treatments being sold by Valeant to Nestle are Restylane, Perlane, Emervel, Sculptra and Dysport.